This Tuesday, the Board of the Reserve Bank of Australia (RBA) will meet for the first time in 2014. Almost all economists agree that the Board will remove the slight easing bias it had late last year and signal that rates are on hold (for now). The ongoing strength in the housing market combined with stronger retail sales and business conditions would have shifted the RBA’s stance, and it’s likely the higher than expected December quarter inflation data would have validated the change.
The RBA is also likely to be more comfortable with the Australian Dollar trading around USD0.88 compared with USD0.91 at the time of the December Board meeting, although it is likely that the RBA will continue to talk the currency lower.
Rate cuts seem to be off the table, with traders only pricing in a 2% chance the RBA will cut rates tomorrow to 2.25%. Similarly, any chance of a rate hike is also unlikely in the foreseeable future.